Issuance of debt securities saw a strong pick up during the first quarter of 2013 on the back of healthy activity by the non-financial sector in Saudi Arabia and UAE banks, according to the latest research from the National Bank of Kuwait (NBK).

Meanwhile, GCC public sector issuance continued to decline, it NBK’s economic update. “New debt issues in 1Q13, especially by corporates, tended to have longer tenors, lengthening the average maturity of outstanding bonds,” it said.

“Total outstanding GCC fixed income instruments reached $231.8 billion at the end of 1Q131,” it said. “The figure is up $12.8 billion from December 2012. UAE, Qatar, and Saudi Arabia continue to account for the majority of the region’s issued debt, with total outstanding securities for these three countries amounting to $99 billion, $69 billion, and $38 billion, respectively, as of 1Q13.

“Issuance in the first quarter of this year was up by two per cent against a year ago, with $16.7 billion worth of debt securities issued. The UAE led the way with $7.8 billion worth of issues, followed by Saudi Arabia ($5.4 billion), and Qatar ($1.3 billion).

“Total issuance in 1Q13 was driven primarily by the non-financial sector (corporates), with the majority of the push coming from Saudi Arabia. Issuance by Saudi corporates amounted to $5.4 billion, or 32 per cent of all new GCC debt issued in 1Q13. Saudi Electrical Company and Sadara dominated Saudi private sector issuance, while Emirates Airlines and Ooredoo drove debt growth in the UAE and Qatar, respectively.

“Public sector issuance has been declining over the last year. During 1Q13, it registered its lowest level since 3Q11, with issuance during the quarter at $4 billion. Public sector issuance, which includes sovereign bonds in addition to government-related entities, accounted for less than a quarter of all issuance during 1Q13, down from an average above 60 per cent over the last two years. The public sector’s share first fell below 50 per cent in 4Q12 for the first time since early 2009 and has remained there in 1Q13, reflecting a recovering private sector.

“GCC bond and Sukuk are increasingly being issued with longer maturities reflecting increased investor confidence and the search for yield. The average maturity of outstanding GCC debt securities increased by 0.2 years between 4Q12 and 1Q13 to reach 5.9 years. This was driven by the corporate sector which saw 1Q13 issuance at longer maturities than usual, which pushed the weighted average maturity of outstanding corporate debt up by 0.6 to 8.5 years.”